China wants bank loans and strong stocks to support 2025 consumption growth campaign

Our briefing on critical macroeconomic and financial developments as of 20 March, 2025

The Chinese central government has sent emphatic signals of greater support for consumption growth in 2025, with the launch of a nationwide campaign in the immediate wake of the Two Session congress.

To this end, it wants commercial banks to step up consumer lending, as well as greater support for asset markets to enhance wealth effects for Chinese households.

The Chinese central bank also wants to raise the role of the debt market in financing tech innovations, with the launch of a special “science and tech board” for related bonds.

A leading Chinese economist expects first quarter GDP growth to hit 5.5% on the back of Beijing’s ongoing stimulus push, despite lacklustre credit growth weighed down by the repayment of hidden local government debt

Beijing launches new campaign to boost consumption

On 15 March 2025, Beijing issued the "Special Action Plan to Spur Consumption" (提振消费专项行动方案).

Unlike the "cash-for-clunkers" campaign that kicked off last year and provided only one-off incentives in the form of subsidies for consumer spending, this new campaign also seeks to boost consumption over the longer term by means of income improvements.

The Plan calls for "spurring rational growth in salaried incomes,and expanding channels for asset-based income."

It also wants to expand new forms of domestic consumption, in the form of tourism and cultural consumption, as well as recreational winter travel in China's colder climes.

China wants the wealth effects of a strong stock market to boost domestic consumption

Beijing has made it clear that boosting Chinese household wealth will play a key role in its campaign to drive growth in domestic consumption this year.

To this end, the Chinese central government has called for "adopting multiple measures to stabilize the stock market, and strengthening strategic force reserves and the development of market stabilization mechanisms."

It's stressed the need for "medium- and long-term funds" to play a greater role in China's capital markets, including commercial insurance funds, national social security funds, basic pension insurance funds, and enterprise (occupational) annuity funds, according to a report from the state-owned Securities Daily.

Beijing also pointed to the possibility of greater government intervention in the stock market, calling for "strengthening the market capitalisation management of listed companies whose share controllers are central state-owned enterprises or state-owned enterprises."

The importance of achieving positive wealth effects in 2025 was stressed earlier by the Government Work Report, delivered by Premier Li Qiang at the start of the Two Sessions congressional event in March.

For the first time on record, the Report made "stabilizing the real estate market and stock market" part of overall demands for economic and social development.

China's central bank advances plans for bond exchange dedicated to tech sector.

The Chinese central bank recently convened a meeting with authorities in the tech hub of Shenzhen, on the establishment of a bond exchange to focus on the debt financing needs of tech companies.

The meeting arrives after China's 2025 Government Work Report called for "accelerating the development of a multi-tier capital market."

At a press conference held on 6 March, Pan Gongsheng (潘功胜), China's central bank governor, said that the authority would work with the securities regulator and the science and tech ministry to "drive [the establishment] of a 'tech board' for the bond market."

Pan said China's financial regulators would "further expand the strength of financial support for science and tech innovation."

The bond market tech board will focus on debt financing for financial institutions, tech enterprises and private equity vehicles to raise money for tech innovation.

China plans to boost consumption via hikes to minimum wage levels

Increases to minimum wage levels could be a key part of Beijing's vaunted mission to raise levels of consumption in the Chinese economy. The National Development and Reform Commission (NDRC) called for "appropriate accelerating of increases to minimum wage levels" in a report released to coincide with the Two Sessions Congressional Event in March.

Su Hainan (苏海南), a researcher with the China Labour Academy, told Red Star News that the move would "raise the confidence of the masses, and thus have a positive effect on consumption."

Since the second half of 2024, multiple provinces around China have lifted their minimum wage levels, including Sichuan, Inner Mongolia, Xinjiang, Fujian, Shanxi and Guizhou.

Why Chinese credit growth came under pressure in February

Renminbi loans increased 1.01 trillion yuan in February, for a reduction of 440 billion yuan compared to the increase for the same period last year.

Credit growth was 7.3%, for a deceleration of 0.2 percentage points compared to the preceding period.

Wen Bin (温彬), chief economist at Minsheng Bank, imputes the slow down to three reasons:

1. Credit extension “leaned forward” in 2025, with the rise in renminbi loans hitting a historic high in January, resulting in a slowdown in February.

2. China’s program to roll over and dissolve local government debt using bond issues also accelerated in February, holding back overall growth in lending to Chinese enterprises. Local government financing platforms are likely using the proceeds of special purpose bonds to pay back bank loans, reducing the outstanding volume of bank credit to businesses.

3. Cyclical and seasonal factors held back borrowing by Chinese households.

China's top financial authority wants to drive growth in consumer lending

The National Financial Regulatory Commission (NFRC) issued a notice on 14 March calling for Chinese financial institutions to "develop consumer finance and help spur consumption."

The Notice gives leeway to banks to loosen consumer lending for "borrowers experience temporary difficulties," including "rationally negotiating loan repayment time-frames and frequencies."

The Notice coincides with the Chinese central government's launch of a mass campaign to spur domestic consumption, in a bid to boost domestic demand and reduce China's economic dependence on exports and investment.

China's Q1 GDP growth could hit 5.5% on back of stimulus measures since September

Luo Zhiheng (罗志恒), chief economist at Yuekai Securities, forecasts that China's first quarter GDP could see year-on-year growth of 5.5%, given strong prints for industrial, services sector, consumer and investment growth in January - February.

According to Luo, the succession of stimulus measures that commenced with the Politburo 26 September meeting last year have made a significant contribution to restoring China's economic momentum, after growth gradually flagged over the first three quarters of 2024.

The Chinese government has established a full-year growth target of around 5% for 2025 - on par with the growth targets for the past two years.